Welp.. Answered my own question & thought I'd give the quickest setup to someone who might search the forums in the future.

1. do your svn check out as normal

2. cp -sr /path/to/your/svn /path/for/a/copy

3. Backup Up the following configuration files:

At /usr/local/ispconfig/server/lib​

config.inc.php mysql_clientdb.conf​

At /usr/local/ispconfig/interface/lib​

config.inc.php​

4. Get rid of your server/interface directories, and move your symbolic link farms into the place of server/interface.

5. Move your configuration files back in place.. Everything should be peachy.

Now when you make changes or when your pulling new changes svn diff works correctly off your work to the repo.

And the update script in install/ directory works beautiful without not affecting my setup & just updating sql entries in the database.

EDIT:
There is 2 limitations preventing this setup, however I solved it in my current checkout(I'm using git-svn.. so I just stash my changes I'm not committing), if Falko or Till say its okay I'll commit these changes. Basically its this..
1. At server.php.. Its using a require(), its not so symbolic link friendly.. Have to specify an absolute path. So here's the needed change.

-require('lib/config.inc.php');
-require('lib/app.inc.php');+// $script_path allows development work of using a symbolic link farm
+// to use along side git or svn
+$script_path = dirname($_SERVER["SCRIPT_FILENAME"]);
+require("$script_path/lib/config.inc.php");
+require("$script_path/lib/app.inc.php");

set_time_limit(0);
ini_set('error_reporting', E_ALL & ~E_NOTICE);
​

2. At server/lib/app.inc.php, the code explicitly disallows symbolic linked classes. This is the diff I did to allow this changed.

Might be better to define e.g. a constant like "devsystem" in config.inc.php that is checked if security functions should be disabled instead of removing the code to protect the function from loading symlinks.

Your using define('DEVSYSTEM',1) in config.inc.php in ~/server/lib/config.inc.php right? Check your permissions as well and the /var/log/ispconfig/cron.log, could be that server.sh and cron_dailly.sh doesn't have the correct permissions (thats happened a couple times with me, had to change the permissions back). Oh, and check the permissions in the repo directory since its symbolically linked.